- Porter and Kramer (2006) advise firms to take a strategic approach to CSR. Using the Novo Nordisk case study as an example, critically discuss if and how firms can create shared value.
Introduction
Creating shared value has arisen as an essential consideration for modern firms seeking to gain a foothold that will create lasting opportunities. In this essay, the shared value will be defined, how it is achieved, and barriers to that process looked at in the next section and ways in which the firm can make shared value explored in the final chapter, with a summary at the end.
According to Porter and Kramer (2006), shared value is a situation in which a business engages in corporate social responsibility activities to generate benefits for relevant stakeholders. This aligns with the triple bottom line concept, which suggests that a firm needs to focus on the social and environmental needs of society and the business area in which it operates while making profits as expected by shareholders. This means that a company needs to work over the long term to reap maximum benefits. However, it has been criticised for being too inward-focused. Instead, other researchers insist on the complete integration of the shared value process with the company’s operations and, at the same time, separate it from its corporate social responsibility agenda (Wieland, 2017).
Consequently, it becomes a concern both in policy and practice as to whether the shared value can be created. Some arguments have been put forward that the creation of shared value is possible. For example, it has been argued that it can be done by leveraging a company’s competencies to bring tangible benefits to its clients (Moon et al., 2011). For example, by seeking to avail cost-effective products to the market, Novo Nordisk seeks to ensure that its primary clients are often low-income earners who get access to diabetes treatments. This creates social value for its clients who get access to healthcare (NN680). However, it hs been observed that the process can expose a firm to adverse conditions such as regulatory measures by the governments where the fir operates; this can reduce profits for the company (Moon et al., 2011). In some cases, this may force a firm to withdraw from markets, which can impact negatively on the value it creates for its clients. For example, it was observed that Novo Nordisk’s intention to discontinue some products in Greece due to a stipulated 25% decrease in drug prices could be attributed to the competing balance between economic and social objectives of creating shared value.
Further, the shared value can be created and achieved by a company in conjunction with all the stakeholders involved to ensure that each stakeholder gets to make a contribution that is meaningful towards achieving mutual benefits (Kramer and Pfizer, 2016). This is through engaging in initiatives that help the company improve its processes, such as knowledge-sharing activities. For instance, Novo Nordisk participates in various international conferences, which enable it to gain insights into the best approach it can take to achieve shared value (NN688). On the other hand, realising shared value by a firm in a sea of stakeholders is made difficult by the fact of poor communications between stakeholders, which increases friction in the process of value creation (Høvring, 2017). This can be seen in the Novo Nordisk case. Both the government and the firm failed to communicate and agree on the best way to price its insulin products, ending in costly litigation and lost value for the government, the company and its clients. An individual company may need to consider three main areas of interest espoused by Porter and Kramer (2006): social, economic and environmental aspects of shared value, which are also called the triple bottom line.
First, companies may need to engage their stakeholders (such as customers and regulators) as the impact of business activities is of stakeholders’ interest. The engagement can be through activities such as training and cost-based approach, such as is done by Novo Nordisk in providing low-cost medical products for its clients. This has the further effect of creating a customer base and goodwill for the firm (Kramer and Pfizer, 2016). Second, companies need to develop environmentally-sustainable processes and products to ensure business sustainability. This will help it avoid high costs of adjustments in the long term and enable other stakeholders’ social welfare (Hsiao & Chuang, 2015). A company may approach shared value from an economic point of view, through investments that create long-term value or by economically empowering its clients. This can be accomplished by providing cheap products and training (Kramer and Pfizer, 2016), enabling them to buy their goods.
In conclusion, shared value is a way of life that can and should be adopted by companies wishing to see profits in the future. This can be done through methods such as collaboration with interested stakeholders such as governments but faces hurdles like lack of communication, which makes it hard to achieve. However, shared value is possible to attain if companies consider using the triple bottom line model of social, environmental and financial activities to realise real shared value.
- Critically examine the sources of scale economies in the success of the Amazon.com case study.
Intro
Amazon is a web retailer that has gained massive success over the years by making substantial investments to serve a large customer base. In this essay, factors of success in realising economies of scale among firms will be discussed in the context of Amazon Inc.
Economies of scale
Economies of scale can be described as improvements in cost savings, performance and output. It can be achieved through the production of goods and services at an increased level, with efforts or investments in the production process’s improvement. This also applies to knowledge in which a company operating in a given sector gets measurable improvements in its earnings by leveraging the experience it gains by serving a large number of customers. Companies can also achieve the scale objectives by refining the processes it uses until it can make substantial gains in earnings by using the knowledge and experience gained over time to make a difference in operations (Dow and Earl, 1999).
Learning
Amazon has gained significant amounts of experience serving its customers over the years since its founding in 1994. This learning is done through the experience it achieves in its business serving an increasing number of customers over the years. Further, the company uses its large technology base to make adjustments to its business based on the data it gains from its customers and operations. These help it to streamline its business process to achieve the highest levels of efficiency. Further, the firm can learn from experts in various fields who advise it on the best courses of action to pursue. Moreover, the knowledge the company gains throughout its operations is used to enable it to provide a standard service while helping shape its strategic direction by helping it understand the business environment it is operating in (A:702).
Technology
Also, Amazon has heavily invested in newer technologies and research that lead it to create new technological products. These include innovations such as in cloud computing services in which it leverages its high amounts of technology and technical know-how to enable clients with a wide range of needs to be served on its platforms (A:701). Further, it has invested in different technological products, which, while contributing to its vast knowledge base, also helps the company diversify into many market niches and serve a large volume of customers. However, the technology requires that Amazon continuously invest in it through mechanisms to keep it up-to-date and also to come up with new products and services to differentiate itself from the competition. This also exposes the firm to losses due to failed product uptakes by the market.
Customisation
Further, Amazon invests in the process of tailoring the experiences of its customers to their specific preferences and needs. This is achieved by using computing technologies to get access to large amounts of customer data and to provide suggestions as to what the customers can buy when they log on to the platform (A:702). However, this use of technologies to customise the user experience brings about high levels of inherent complexity in its business processes and technologies.
Standardisation
On top of that, Amazon has heavily invested in collective user experience for its customers, including optimising the response times of its website, making its sites easily navigable, and providing an excellent customer relations programme across the board. This approach has helped Amazon get a broad base of loyal customers who number in the hundreds of millions. However, this user experience has required Amazon to invest heavily in technology, enabling the firm to research on the best customer experience (A:702). Further, while it provides a significant economy of scale, it does not differentiate Amazon in the long term from its competitors who may be able to make a similar product.
Diversification
Moreover, Amazon has heavily invested in various types of businesses, offering multiple types of products and services to different clientele spread over different fields and disciplines. These include computing technologies, publishing, entertainment and online retail. As a result of this, Amazon has been able to leverage its large body of knowledge and skills to serve a large number of diverse needs (A: 692). However, it has come at a cost for Amazon as it made losses severally due to the increased expenses relating to diversification and investment into new fields.
Conclusion
Amazon has gained a significant advantage over its competitors by investing heavily in large-scale and diverse products and services that serve a large and varied customer base. While a company strives to achieve economies of scale and scope, it may experience some challenges, including expenses and risks. Nevertheless, the company has an advantage over the costs and uncertainties, which is the incremental value of its knowledge and investments provided by a broad base of infrastructure.
Introduction
Disruptive modernisations have had an excessive influence on industries, which has prompted firms’ competitiveness, not withholding the struggle to gain profits (Shelanski, 2013). It is defined by Zach et al. (2020) as the technology whose application expressively disturbs the operations of businesses. Gutteng (2015) classified Airbnb as a disruptive novelty. Airbnb has a website that gives ordinary people room to rent out or sublet their residence for people looking for accommodations (Zervas et al., 2017).
Airbnb was formed in 2008 and has gained extensive popularity as at now selling numerous millions of room nights per year (Wachsmuth and Weisler, 2018). After a long struggle, in 2011, the Airbnb began its operations with clients booking through its website database for accommodation (Guttentag and Smith, 2017). The success of Airbnb was brought into the limelight employing the lens of Clayton Christensen’s disruptive innovation theory. (Christensen et al., 2015). Disruptive modernisation theory points out how products are missing in traditionally preferred traits but offer additional reimbursements. With time, it could change the market and capture the majority of consumers (Guttentag, 2015). As considered by disruptive revolution, Airbnb’s innovative commercial model is majorly dependent on modern internet technologies (King and Baatartogtokh, 2015). It has a unique demand that is positioned on cost-saving because of its comparatively low-costs, suitable household features and possibilities for new reliable limited experiences (Bashir and Verma, 2016).
Airbnb is also a part of the more significant claims in ‘collaborative consumption,’ also referred to as ‘sharing economy.’ The sharing economy is a way in which people make use of their possessions that are not in use, like living spaces, cars, and power tools (Zervas et al., 2017). The notion has been incorporated by commentators, governments, businesspersons’ locals, start-ups, and others as it paves the way for the creation of opportunities by the local and nationwide economies (Bower and Christensen, 1995). This accommodation sharing platform Airbnb is also denoted as sharing economy paradigm, which has endorsed itself in the form of helping the middle-income societies to be able to advance and retain a position in private housing markets (Wachsmuth and Weisler, 2018). In international capitals, Airbnb’s notion is very salient as a result of impoverished housing and a high existing tourist demand (Guttentag, 2015).
Some factors have made the Airbnb a success (Lampinen and Brown, 2017). As Guttentag (2015) alludes, Airbnb is cost-effective compared to hotels and lodgings; therefore, it is more susceptible to appealing customers. It is also known to offers diverse choices extending to apartments, secured yachts, single rooms, entire houses, houseboats and many varieties all on the Airbnb website (Guttentag, 2015). Airbnb also offers customised pursuits. This means that the guests have the freedom to search its database for their preferred accommodation, unlike in mainstream hotels searches whereby one can only book dates and the location (Geissinger et al., 2020). There are emerging challenges that face Airbnb disruptive novelty (Marano et al., 2020). Airbnb’s main problem is the widespread illegality which arises as a result of zoning codes and other regulations that most cities have that does allow short-term leasing without special permits (Wachsmuth and Weisler, 2018). San Francisco is one example of a town that does not allow unlicensed rentals of less than thirty days. Another challenge is the lack of security and safety regulations in the Airbnb (Henama, 2018). The hosts of the Airbnb may not be in a position to offer these regulations. In an event where there are fire accidents or loss of personal property, there is no secure insurance or any compensation to the guest because the accommodations are private properties (Bashir and Verma, 2016). Lastly, Airbnb does not guarantee personal privacy (Qin et al., 2020). The host might be spontaneous on several occasions inviting friends over, which becomes uncomfortable for the guests.
Conclusion.
This essay aimed to assess Airbnb’s success using disruptive innovations. As it is, Airbnb is valued in terms of ‘sharing economy,’ an act of rendering underused assets. Entrepreneurs, governments and observers have incorporated the notion as bringing innovative opportunities for local and nationwide economies. Airbnb also includes modern internet technology in its day to day working. Airbnb is also popular due to its effective costs, wide range selection, and customised searches.
References 5
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References1
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References 4
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